UNIT IV-

UNIT IV-

Development Banks- Role and policy measures relating to development banks and financial
institution in India, Products and services offered by IFCI, IDBI, SIDBI, IDFCL, EXIM Bank,
NABARD and ICICI.

Mutual Funds-Meaning and benefits of mutual funds, types of mutual funds, SEBI guidelines
relating to mutual funds.

Q.1 What are the development Banks? Describe the objectives, characteristics &functions
of Development banks.

Q.2.Explain the products and services –IFCI, SFC,ICIC,IDBI,IRB,SIDBI,NABARD&

EXIM Bank

Q.3.Define Nonbanking financial institutions with its types ,needs and functions.

Q.4.What is meant by Merchant Banking? What are the various categories of Merchant
Banking? Discuss its main functions and Role in India.

Q.5 What do you mean by Mutual Funds? Explain its Types & Benefits .

1. DEVELOPMENT BANKS

What are Development Banks?

Development banks are specialized financial institutions. They provide medium and long-
term finance to the industrial and agricultural sector. They provide finance to both private and
public sector. Development banks are multipurpose financial institutions. They do
term lending, investment in securities and other activities. They even promote saving and
investment habit in the public are those which have been set up mainly to provide infrastructure
facilities for the industrial growth of the country. They provide financial assistance for
bothpublic and private sector industries.
The phrase development bank may refer to:

 Community development banks, fund low-income areas in the U.S.

 National development banks, government-owned institutions that provide financing for
economic development
 Development finance institutions, provide finance to the private sector for investments that
promote development
 International financial institutions, conduct development-oriented finance on a bilateral or
multilateral basis
Features of a Development Bank:
Following are the main characteristic features of a development bank:
1. It is a specialised financial institution.

2. It provides medium and long term finance to business units.

3. Unlike commercial banks, it does not accept deposits from the public.

4. It is not just a term-lending institution. It is a multi-purpose financial institution.

5. It is essentially a development-oriented bank. Its primary object is to promote economic

development by promoting investment and entrepreneurial activity in a developing economy. It
encourages new and small entrepreneurs and seeks balanced regional growth.

6. It provides financial assistance not only to the private sector but also to the public sector
undertakings.

7. It aims at promoting the saving and investment habit in the community.

8. It does not compete with the normal channels of finance, i.e., finance already made available
by the banks and other conventional financial institutions. Its major role is of a gap-filler, i. e., to
fill up the deficiencies of the existing financial facilities.

9. Its motive is to serve public interest rather than to make profits. It works in the general interest
of the nation.
Objectives of Development Banks
The main objectives of the development banks are

1. To promote industrial growth,

2. To develop backward areas,

3. To create more employment opportunities,

4. To generate more exports and encourage import substitution,

5. To encourage modernization and improvement in technology,

6. To promote more self employment projects,

7. To revive sick units,

8. To improve the management of large industries by providing training,

9. To remove regional disparities or regional imbalance,

10. To promote science and technology in new areas by providing risk capital,

11. To improve capital market in the country.

Development Banks in India

Working capital requirements are provided by commercial banks, indigenous bankers, co-
operative banks, money lenders, etc. The money market provides short-term funds which mean
working capital requirements.

The long term requirements of business concerns are provided by industrial banks, and the
various long term lending institutions which are created by government. In India these long term
lending institutions are collectively referred as development banks. They are:

1. Industrial Finance Corporation of India (IFCI), 1948

2. Industrial Credit and Investment Corporation of India (ICICI), 1955
 3. Industrial Development of Bank of India (IDBI), 1964
4. State Finance Corporation (SFC), 1951
5. Small Industries Development Bank of India (SIDBI), 1990
6. Export Import Bank (EXIM)
7. Small Industries Development Corporation (SIDCO)
8. National Bank for Agriculture and Rural Development (NABARD).
In addition to these institutions, there are also institutions such as Life Insurance Corporation of
India, General Insurance Corporation of India, National Housing Bank, Unit Trust of India, etc.,
which are providing investment funds.

Differences between Commercial banks and Development banks

The following are some of the differences between commercial banks and development banks.

DEVELOPMENT
COMMERCIAL BANKS
BANKS

Provide short term loans. Provide long term loans.

Accept deposits from

commercial banks,
Accept deposits from the public.
Central and State
governments.

Provide refinancing
Direct finance to customers. facilities to commercial
banks.

Play an important role

Plays an important role in the money market. in hire purchase, lease
finance, housing loan.

Public sector banks have their share capital

Central and Statement
contributed by the government while private
governments contribute
sector banks have share capital contributed
capital.
by the public.
 DEVELOPMENT
COMMERCIAL BANKS
BANKS

Promote savings among the public and help They promote economic
commercial activities. growth of the country.

What is function of development bank?

Development bank is essentially a multi-purpose financial institution with a broad development

outlook. A development bank may, thus, be defined as a financial institution concerned with
providing all types of financial assistance (medium as well as long term) to business units, in the
form of loans, underwriting, investment and guarantee operations, and promotional activities —
economic development in general, and industrial development, in particular.

In short, a development bank is a development- oriented bank.

Main functions of Development banks would include:-

1. It is a specialised financial institution.

2. It provides medium and long term finance to business units.

3. Unlike commercial banks, it does not accept deposits from the public.

4. It is not just a term-lending institution. It is a multi-purpose financial

institution.

5. It is essentially a development-oriented bank. Its primary object is to promote economic

development by promoting investment and entrepreneurial activity in a developing economy. It
encourages new and small entrepreneurs and seeks balanced regional growth.

6. It provides financial assistance not only to the private sector but also to the public sector
undertakings.
 7. It aims at promoting the saving and investment habit in the community.

8. It does not compete with the normal channels of finance, i.e., finance already made available
by the banks and other conventional financial institutions. Its major role is of a gap-filler, i. e., to
fill up the deficiencies of the existing financial facilities.

9. Its motive is to serve public interest rather than to make profits. It works in the general interest
of the nation.

2.FINANCIAL INSTITUTION

Private (shareholder-owned) or public (government-owned) organizations that, broadly speaking,

act as a channel between savers and borrowers of funds (suppliers and consumers of capital).
Two main types of financial institutions (with increasingly blurred dividing line) are: (1)
Depository banks and credit unions which pay interest on deposits from the interest earned on
the loans, and (2) Non-depository insurance companies and mutual funds (unit trusts) which
collect funds by selling their policies or shares (units) to the public and provide returns in the
form periodic benefits and profit payouts.

Specialized Financial Institutions in India make an important segment amongst all the
financial institutions in India. The Indian financial institutions are governed under the regulations
of both the state and central governments.

The governments on the other hand use them in structuring the planning and development of the
country.
With the help of these financial institutions, the government takes up projects and tasks in order
to enhance the overall economic scenario of the country. Depending on the economic importance
of the financial organizations, all the financial institutions of India can be divided under
following categories:

 Specialized Financial Institutions in India

 All-India Development Banks
 State-level institutions
 Investment Institutions
 Other institutions

In India there are specialized financial institutions in all levels. Both in the Central and State
level there are a wide variety of financial institutions offering various financial services. The
specialized financial institutions in India are not only committed to offer financial services to its
clients but are also devoted to attain certain missions in the steps of economic development of
the country. Some of the major financial institutions of India such as the Industrial Finance
Corporation of India, Industrial Development Bank of India, ICICI and Export Import Bank of
India are the specialized financial institutions in India that work both in the state level and central
level.

Apart from these top-listed financial institutions, there are other financial institutions also that
offer specialized financial services to its clients. These financial institutions are generally
devoted to serve some specific domains such as: small and medium scale industries, sick-
industries, housing, agriculture, railways, shipping, power, roads and others. Small and medium
scale business and agriculture are the two domains for which these specialized financial
institutions have come up with various financial products and services.

Specialized financial institutes like Export Credit Guarantee Corporation of India Ltd and Export
Import Bank of India (EXIM) also offer special financial services to help the exporters with their
business. Apart from offering financial products, these institutions also provide guarantee
products to the export companies.

Role of Financial Institutions

Financial institutions include banks, credit unions, asset management firms, building societies,
and stock brokerages, among others. These institutions are responsible for distributing financial
resources in a planned way to the potential users.

There are a number of institutions that collect and provide funds for the necessary sector or
individual. On the other hand, there are several institutions that act as the middleman and join the
deficit and surplus units. Investing money on behalf of the client is another of the variety of
functions of financial institutions.
 Financial institutions can be categorized as follows:

 Deposit Taking Institutions

 Finance and Insurance
Institutions
 Investment Institutions
 Pension Providing Institutions
 Risk Management Institutions

At the same time, there are several governmental financial institutions assigned to regulatory and
supervisory functions. These institutions have played a distinct role in fulfilling the financial and
management needs of different industries, and have also shaped the national economic scene.

Deposit-taking financial organizations are known as commercial banks, mutual savings banks,
savings associations, loan associations and so on.

Role of Financial Institutions:

The primary functions of financial institutions of this nature are as follows:

 Accepting Deposits
 Providing Commercial Loans
 Providing Real Estate Loans
 Providing Mortgage Loans
 Issuing Share Certificate


1.Finance companies provide loans, business inventory financing and indirect consumer
loans. These companies get their funds by issuing bonds and other obligations. These companies
operate in a number of countries. On the other hand, there are insurance companies that provide
coverage for a variety of risk factors and they also provide several investment
options. Insurance companies provide loans for a number of purposes and create investment
products.

2.The functions of financial institutions, such as stock exchanges, commodity markets,

futures, currency, and options exchanges are very important for the economy. These institutions
are involved in creating and providing ownership for financial claims. These institutions are also
responsible for maintaining liquidity in the market and managing price change risks. As part of
their various services, these institutions provide investment opportunities and help businesses to
generate funds for various purposes.

3.The functions of financial institutions like investment banks are also vital and related to the
investment sector. These companies are involved in a number of financial activities, such as
underwriting securities, selling securities to investors, providing brokerage services, and
fundraising advice.

The Industrial Finance Corporation of India Limited

 Service & Products offered by IFCI,

The Industrial Finance Corporation of India Limited was incorporated on July 1, 1948 by the
Government of India as a tool to overcome the scarcity of long-term finance plans in the
industrial sector. IFCI is the first Development Financial Institution in India.

During the period of independence in 1947, the capital market scenario was horrendous. In spite
of the major requirement of capital market in India, there were no providers for it. To add to the
woes, there were no merchant bankers and underwriting firms. The commercial banks were not
well-accoutered to render long-term financial plans in the industrial sector. Indian finance market
were drowning into a well of failure when the Government of India decided to launch the IFCI
with the aim to provide long-term financial plans to all the sectors of Indian industry. The
Development Financial Institution in India (DFI) was incorporated with the aim to make access
to inexpensive funds easy enough for the industrial sector through Central Bank's Statutory
Liquidity Ratio or SLR. This Statutory Liquidity Ratio enabled the corporate borrowers to take
loans and overtures at a much concessional rates.

During the early 1990s, the Government of India realized that the financial system of the country
needs more flexibility. The Government also felt that The Industrial Finance Corporation of
India Limited needed to access directly to the capital market for any kinds of funds or other
financial issues. At this point of time, that is in 1993, the Government of India took the decision
of transferring IFCI from Statutory Liquidity Ratio to a company that would come under the
Indian Companies Act, 1956.

The main focus of The Industrial Finance Corporation was to provide long-term financial
benefits to various sectors in Indian industry and it has fulfilled it quite efficiently. IFCI has also
been quite subservient in implementing the number of things that the Government of India
planned up to ensure financial benefits into services. IFCI carried out all the responsibilities
regarding Government's industrial policy initiatives till the establishment of ICICI in 1956 and
IDBI in 1964.

The Industrial Finance Corporation of India had made a wide range of contributions in various
sectors in Indian industry. Some of the noteworthy contributions of IFCI include improvement of
 Indian industry, export promotion, import permutation, development in business, pollution
control measures, energy preservation, and rendering direct and indirect employment. There are
a number of industrial sectors that have been massively benefited from The Industrial Finance
Corporation of India Limited. They are as follows:
 Capital & intermediate goods industry that includes products such as electronics, synthetic
plastics, synthetic fibers, and miscellaneous chemicals
 Service industries that include hotels and hospitals
 Consumer goods industry such as textiles, paper, and sugar
 Infrastructure sector which involves power generation and telecom services
 Basic industries involving products such as cement, iron & steel, fertilizers, basic chemicals
The economic contributions of The Industrial Finance Corporation of India Limited has been
quite large-scale since its establishment. IFCI has sanctioned funds of an amount of ` 462 billion
to 5707 companies and has paid out ` 444 billion in totality. The business entrepreneurs have got
immense help from IFCI as well when they started off with any new business or even on their
way to expand the already existing business. IFCI has been a great helping hand to the entire
industrial sector in India and most importantly it was the only support at the time of scarcity.

IFCI Ltd.’s Board of Directors as on June 19, 2015

Sl.No Name Particulars

1 Shri Malay Mukherjee Chief Executive Officer &
Managing Director
2 Shri S.V. Ranganath Independent Director and
Non-Executive Chairman of
the Board
3 Shri Achal Kumar Gupta Deputy Managing Director
4 Shri Alok Tandon Government Nominee
Director
5 Shri Rajesh Aggarwal Government Nominee
Director
6 Ms. Kiran Sahdev Directo
7 Smt. Savita Mahajan Independent Director
8 Shri K.S. Sreenivasan Independent Director
9 Prof. N. Balakrishnan Director
10 Prof. Arvind Sahay Independent Director

FOCUS
IFCI has fulfilled its original mandate as a DFI by providinglong-term financial support to all
segments of IndianIndustry. It has also been chiefly instrumental intranslating the Government’s
development priorities intoreality. Until the establishment of ICICI in 1956 and IDBIin 1964,
IFCI remained solely responsible forimplementation of thegovernment’s industrial policy
initiatives. Its contributionto the modernization of Indian industry, exportpromotion, import
substitution, entrepreneurshipdevelopment, pollution control, energy conservation andgeneration
of both direct and indirect employment isnoteworthy. Some sectors that have directly benefitedfrom
IFCI’s disbursals include:

•Consumer goods industry (textiles, paper, sugar);

•Service industries (hotels, hospitals);
•Basic industries (iron & steel, fertilizers, basicchemicals,cement);
•Capital & intermediate goods industries (electronics, synthetic fibers, synthetic plastics,
miscellaneous chemicals); and
•Infrastructure (power generation, telecom services)
IFCI's ECONOMIC CONTRIBUTION
IFCI’s economic contribution can be measured from thefollowing:
•Cumulatively, IFCI has sanctioned financialassistance of Rs 462 billion to 5707 concerns anddisbursed
Rs 444 billion since inception.
•In the process, IFCI has catalyzed investments worthRs 2,526 billion in the industrial and
infrastructuresectors.
•By way of illustration, IFCI’s assistance has beenhelped create production capacities of :· 6.5
million spindles in the textile industry· 7.2 million tons per annum (tpa) of sugar production· 1.7
million tap of paper and paper products· 18.5 million tons tap of fertilizers· 59.3 million tpa of cement·
30.2 million tap of iron and steel· 32.8 million tpa of petroleum refining· 14,953 MW of electricity· 22,106 hotel
rooms· 5,544 hospital beds· 8 port projects, 66 telecom projects and 1 bridge project.
•The direct employment generated as a result of its financial assistance is estimated at almost 1
millionpersons.
•IFCI has played a pivotal role in the regionaldispersalof industry, 47% of IFCI’s assistance has gone
to2,172units located in backward areas, helping to catalyze investments worth over Rs1,206 billion.
•IFCI’s contribution to the Government exchequer byway of taxes paid is estimated at Rs9 billion.
•IFCI has promoted Technical Consultancy Organizations (TCOs), primarily in less developed
states to provide necessary services to thepromoters of small- and medium-sized industries in
collaboration with other banks and institutions.
 IFCI has also provided assistance to self-employed youth and women entrepreneurs
under its Benevolent Reserve Fund (BRF) and the Interest Differential Fund (IDF).
•IFCI has founded and developed prominent institutions like:
Management Development Institute (MDI) for management training and development ICRA for
credit assessment rating
•Tourism Finance Corporation of India (TFCI) for promotion of the hotel and tourism industry
•LIC Housing Finance Ltd.
•GIC Grih Vitta Ltd., and
•Bio-tech Consortium Ltd. (BCL).
IFCI has also set up Chairs in reputed educational/management institutions and universities.
A major contribution of IFCI has been in the early assistanceprovided by it to some of today’s
leading Indian entrepreneurs who may not have been able to start their enterprises or expand without
the initial support from IFCI.

CORPORATE STRATEGY
IFCI has been able to achieve a financial turnaround with the consistent support and cooperation of all its
stakeholders and is now endeavoring to re-position itself

As a part of its organizational strategy, IFCI plans toinduct strategic investor(s) who may provide
besides funds support, business know-how,marketing techniques, technology, clientele, brand
name etc. to achieve scale and scope economiesand provide expansion of the capital and
resources base. In the interim period, IFCI plans to enhanceorganizational value through
better realization of itsNon-performing Assets (NPAs) and unlocking of value of its investment
port-folio including unquoted investments as well as real estate assets.
 The present business strategy of IFCI envisages (a)retaining and enhancing its core competence
in longterm lending to industrial and infrastructure sectorsand (b) expanding fee-based
businesses tocapitalize opportunities in Corporate Advisory Services.

Where Sale Notices have been issued(i) by Official Liquidator(ii) by Recovery Officer(iii) Under
Securitization Act 2002(iv) by other Institutions
Where
(i) Recovery Certificates have been issued By DRTs
(ii) Liquidation Proceeding is Pending This section has two parts.

Part A gives the names of Companies where Sale Notices have been issued by theOfficial
Liquidators attached to the High Courts and / orby the Recovery Officers attached to Debt
Recovery Tribunals (DRTs) and / or under Securitization Act 2002.

Part B gives the names of cases where execution proceedings before Recovery Officers of
DRTs are pending and/or cases where liquidation proceedings before Official Liquidators
attached to High Courts are on. To peruse the notices published in respect of cases of Part-A
and to get the details of Company Profile in respect of cases of Part– B, interested buyers may click
the name of the 'Company' listed below.

IFCI VENTURE CAPITAL FUNDSLTD.(IVCF)

IFCI Venture Capital Funds Ltd. (IVCF) was originally setup by IFCI as a Society by the
name of Risk Capital Foundation (RCF) in 1975 to provide institutional support to first generation
professionals and technocrats setting up their own ventures in the medium scale sector, under the
Risk Capital Scheme. In 1988, RCF was converted into a company, Risk Capital and Technology Finance
Corporation Ltd. (RCTC), when it also introduced the
Technology Finance and Development Scheme for financing development and commercialization
of indigenous technology. To reflect the shift in the company’s activities, the name of RCTC was
changed toIFCI Venture Capital Funds Ltd. (IVCF) in February 2000.Over the years, IVCF has
provided financial assistance to new ventures, supported commercialization of new technologies.
Service & Products offered by IDBI,
IDBI Bank (Industrial Development Bank of India) was established in 1964 by an Act of
Parliament only to provide credit and other financial facilities for the development of the
fledgling Indian industry. The central government is the owner of this bank and employees will
be called as Central Government staffs. It is one among the public sector banks in India and is a
nationalized bank to be treated on par with SBI and other nationalized banks in accordance with
the notification dated 26th February 2013 by the finance ministry. At present the government
holds 77% stake in IDBI Bank. For the first quarter of the current financial year 2017-18, the
bank reported a net loss of Rs.853 crore compared to a profit of Rs.241 crore during the
corresponding period last financial year. In the fourth quarter of financial year 2016-17, the bank
had reported a loss of Rs.3,200 crore. While the reported loss was lower than the preceding
quarter, bad loans continued to surge. In the quarter ending September 2017 the bank bounced
back with a loss of Rs.198 crore compared to a loss of over Rs.2,000 crore in the previous
quarter. The bank is expected to return to profit in the near future.

It currently has 3,817 ATMs, 1,995 branches, including one overseas branch in Dubai, and 1,382
centers.[citation needed]
The bank has an aggregate balance sheet size of INR 3.74 trillion as on 31 March 2016.[2]
The Present
Today, IDBI Bank is counted amongst the leading public sector banks of India, apart from claiming the
distinction of being the 4th largest bank, in overall ratings. It ispresently regarded as the tenth largest
development bank in the world, mainly in terms of reach. This is because of its wide
network of 509 branches, 900 ATMs
and3 1 9 c e n t e r s . A p a r t f r o m b e i n g i n v o l v e d i n b a n k i n g s e r v i c e s , ID B I h a s s e t
u p institutions like The National Stock Exchange of India (NSE), The National Securities Depository Services
Ltd. (NSDL) and the Stock Holding Corporation of India (SHCIL).
Objectives
The main objectives of IDBI are to serve as the apex institution for term finance for industry in India. Its
objectives include (1) Co-ordination, regulation and supervision of the working of other financial institutions such
as IFCI , ICICI, UTI, LIC, Commercial Banks and SFCs.(2) Supplementing the resources of other financial
institutions andthereby widening the scope of their assistance.(3) Planning, promotion and development of key
industries anddiversifications of industrial growth.(4) Devising and enforcing a system of industrial growth
that conformsto national priorities.
Function
The IDBI has been established to perform the following functions-(1) To grant loans and advances to IFCI, SFCs
or any other financialinstitution by way of refinancing of loans granted by suchinstitutions which are
repayable within 25 year.(2) To grant loans and advances to scheduled banks or state co-operativebanks by way
of refinancing of loans granted by such institutionswhich are repayable in 15 years.(3) To grant loans and
advances to IFCI, SFCs, other institutions,scheduled banks, state co-operative banks by way of refinancing
of loans granted by such institution to industrial concerns for exports
(4) To discount or rediscount bills of industrial concerns.
(5) To underwrite or to subscribe to shares or debentures of industrialconcerns.
(6) To subscribe to or purchase stock, shares, bonds and debenturesof other financial institutions.
(7) To grant line of credit or loans and advances to other financialinstitutions such as IFCI, SFCs, etc.
(8) To grant loans to any industrial concern.
(9) To guarantee deferred payment due from any industrial concern.
(10) To guarantee loans raised by industrial concerns in the market or from institutions.
(11) To provide consultancy and merchant banking services in or outsideIndia.
(12) To provide technical, legal, marketing and administrative assistanceto any industrial concern or person for
promotion, management or expansion of any industry.(13) Planning, promoting and developing industries to fill
up gaps inthe industrial structure in India.(14) To act as trustee for the holders of debentures or other
securities.
Subsidiaries
The following are the subsidiaries of IDBI.(1) Small Industries Development Bank of India (SIDBI)(2) IDBI
Bank Ltd.(3) IDBI Capital Market Services Ltd.(4) IDBI Investment Management Company
Capital Structure and Operations
As on September 30,1996, the authorised Capital of IDBI wasRs.2000crores. Issued, subscribed
and paid up share capital was Rs.828.76crores.Reserves were Rs.6309 crores. Loan funds
were Rs.35450 crores. Thetotal outstanding loans, investments and guarantee of IDBI
stood atRs.39,221 crore as on 31st March 1996.

Service & Products offered by SIDBI

The SIDBI (Small Industries Development Bank of India) is a wholly owned subsidiary of IDBI
(Industrial Development Bank of India), established under the special Act of the Parliament 1988
which became operative from April 2, 1990. SIDBI was made responsible for administering
Small Industries Development Fund and National Equity Fund that were administered by IDBI
before. SIDBI is the Primary Financial Institution for promoting, developing and financing
MSME (Micro, Small and Medium Enterprise) sector.

Besides focussing on the development of the Micro, Small and Medium Enterprise sector, SIDBI
also promotes cleaner production and energy efficiency. SIDBI helps MSMEs in acquiring the
funds they require to grow, market, develop and commercialize their technologies and innovative
products. The bank provides several schemes and also offers financial services and products for
meeting the individual’s requirement of various businesses.

Finance Facilities Offered by SIDBI

SIDBI offers the following facilities to its customers:

 Direct Finance: SIDBI offers Working Capital Assistance, Term Loan Assistance,
Foreign Currency Loan, Support against Receivables, equity support, Energy Saving
scheme for MSME sector, etc.
 Indirect Finance: SIDBI offers indirect assistance by providing Refinance to PLIs
(Primary Lending Institutions), comprising of banks, State Level Financial Institutions,
etc. with an extensive branch network across the country. The key objective of the
refinancing scheme is to raise the resource position of Primary Lending Institutions that
would ultimately enable the flow of credit to the MSME sector.
 Micro Finance: SIDBI offers microfinance to small businessmen and entrepreneurs for
establishing their business.

Functions of SIDBI (Small Industries Development Bank of India)

1. Small Industries Development Bank of India refinances loans that are extended by the
PLIs to the small-scale industrial units and also offers resources assistance to them.
2. It discounts and rediscounts bills
3. It also helps in expanding marketing channels for the products of SSI (Small Scale
Industries) sector both in the domestic as well as international markets.
4. It offers services like factoring, leasing etc. to the industrial concerns in the small-scale
sector.
5. It promotes employment oriented industries particularly in semi-urban areas for creating
employment opportunities and thus checking relocation of people to the urban areas.
6. It also initiates steps for modernisation and technological up-gradation of current units.
7. It also enables timely flow of credit for working capital as well as term loans to Small
Scale Industries in cooperation with commercial banks.
8. It also co-promotes state level venture funds.

Benefits of SIDBI
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 Custom-made – SIDBI policies loans as per the requirements of your businesses. If your
requirement doesn’t fall into the ordinary and usual category, SIDBI would assist funding
you in the right way.
 Dedicated Size – Credit and loans are modified as per the size of the business. So,
MSMEs could avail different types of loans custom-made for suiting their business
requirement.
 Attractive Interest Rates – It has a tie-up with several banks and financial institutions
world over and could offer concessional interest rates. The SIDBI has tie-ups with World
Bank and the Japan International Cooperation Agency.
 Assistance – It not just give provides a loan, it also offers assistance and much-required
advice. It’s relationship managers assist entrepreneurs in making the right decisions and
offering assistance till loan process ends.
  Security Free – Businesspersons could get up to INR 100 lakhs without providing
security.
 Capital Growth – Without tempering the ownership of a company, the entrepreneurs
could acquire adequate capital for meeting their growth requirements.
 Equity and Venture Funding – It has a subsidiary known as SIDBI Venture Capital
Limited which is wholly owned that offers growth capital as equity through the venture
capital funds which focusses on MSMEs.
 Subsidies – SIDBI offers various schemes which have concessional interest rates and
comfortable terms. SIDBI has an in-depth knowledge and a wider understanding of
schemes and loans available and could help enterprises in making the best decision for
their businesses.
 Transparency – Its processes and the rate structure are transparent. There aren’t any
hidden charges.

How to apply for loan through SIDBI

For processing a loan through SIDBI, an entrepreneur would have to go through the below-
mentioned process:

 Step 1: Recognized consultants empanelled with the SIDBI would prepare the documents
needed. Depending on the requirements and information specified by the MSMEs, the
consultants would prepare a BIM (Basic Information Memorandum). This document
would include all the information related to the rating agencies and banks.

 Step 2: The Basic Information Memorandum is approved by MSME entrepreneur. The

accredited consultants would then submit the Basic Information Memorandum to SIDBI.

 Step 3: In case required, the proposal would be rated by the rating agency which is
approved by the Reserve Bank of India.

 Step 4: SIDBI would directly handle the below-mentioned cases:

a) SIDBI would offer equity or quasi-equity to the existing units that are growth oriented
b) The bank would finance units which are in the service sector
c) It would offer credit to MSMEs for Cleaner Production Processes and Energy Efficient.

 Step 5: For other case, the application for the loan would be submitted to the Public-
Sector Banks. SIDBI (Small Industries Development Bank of India) has an MOU
(memorandum of understanding) with the public-sector banks for the issuing loans.
SIDBI would help the entrepreneur at each stage till the loan is finally processed.
MSMEs stands a better chance of availing the loan in time and also could avoid needless
delays.

Service & Products offered by , EXIM Bank

The Export-Import Bank of the United States (EXIM) is an independent, self-sustaining agency
with an 82-year record of supporting American jobs by financing the export of U.S. goods and
services. In the last decade, EXIM has supported more than 1.7 million jobs in all 50 states.

In 2016, due to a lack of quorum on the Board of Directors, EXIM was not able to provide full
support for American jobs and the U.S. exports that create them. The last year that the Bank was
fully operational was 2014.

Product & Service

EXPORT CREDIT INSURANCE

What is Export Credit Insurance?

This facility provides risk protection to exporters against payment default by foreign buyers on
goods and services exported on credit terms. With this protection, exporters have the confidence
to venture into emerging markets, thereby expanding their export thrust. With the Eximbank
credit insurance policy, exporters can obtain protection against political and commercial risks.

How Does It Work?

An approved Eximbank exporter submits the Declaration of Shipments and Duty Paid schedule
along with the premium that is calculated per invoice value, weekly.

What are the Rates Offered by the Eximbank?

Premiums vary depending on the buyer’s credit worthiness, payment terms and the economic and
political environment. Currently the premium rate ranges between 1.6% and 3.5%.
RAW MATERIAL FINANCING

What is Raw Material Financing?

This is a short-term loan/direct financing that the Eximbank extends to an approved company to
assist in the payment of inventory, may it be raw materials, semi-finished or finished products.
Once goods are received, the exporter can now prepare products for local sale or export. This
facility is offered at competitive rates and is designed for trade transactions that are short-term
and self-liquidated.

How Does It Work?

An approved Eximbank exporter submits a supplier’s invoice and wire transfer instructions along
with a request of transfer of funds to the supplier. 100% of the invoice value is then forwarded to
the supplier and after the agreed tenor is passed, the exporter repays the Eximbank 100% of the
invoice inclusive of interest.

What are the Terms Related to Raw Material Financing?

The tenor is customised to the exporter’s needs and usually ranges between 30 days and 270
days.
NOTE: Raw Material facilities can be discounted in Trinidad and Tobago Dollars (TTD) or
United States Dollars (USD).
 Advantages of Raw Material Financing?

 The company is offered credit terms so that it can add flexibility to its cash flow and thereby
manage its business more efficiently.
 It provides extra time for the goods to clear customs and be resold before you need to pay for the
goods.
 Suppliers are ensured payment upon request from the exporter.

FACTORING AND DISCOUNTING

What is Factoring and Discounting?

This facility provides short-term financing to exporting manufacturers, distributors and service
providers. Businesses receive financing in the form of a loan between 85% - 95% of the invoice
value of export sales, which must be repaid from the assigned proceeds of payments from
Eximbank approved buyers.
This facility aims to bridge the gap between the settlement of production costs and export sales
receipts, allowing a business to accelerate cash flow and shorten operating cycles.

How Does It Work?

An approved Eximbank exporter submits all the required documents on the facility checklist
related to an approved Eximbank buyer. Following this, 85% -95% of the invoice value is
forwarded to the exporter and after the agreed tenor is passed the buyer repays the Eximbank
100% of the invoice value. All Eximbank fees and related interest are extracted and the
difference is refunded to the exporter

What are the Terms Related to Factoring and Discounting?

The tenor is designed to fit the relationship between the exporter and their buyers. The credit
period usually ranges between 30 days and 120 days Bill of Lading (B/L) or Drawdown (DD).

What are the Different Types of Factoring and Discounting Financing?

This facility can be discounted in Trinidad and Tobago Dollars (TTD) or United States Dollars
(USD)

Advantages of Factoring and Discounting Financing

 The exporter’s working capital cycle is shortened, therefore allowing for increased production
levels.
 Exporters can convert a credit sale into a cash sale, thereby freeing up their capital for further
exports.

ASSET FINANCING

What is Asset Financing?

This facility can assist manufacturers seeking to perform equipment upgrades to improve the
quality of their export products or for renovation of their premises.

What are the Terms Related to Asset Financing?

The tenor is designed to the exporter’s needs and usually ranges between one to five years.
 What are the Payment Terms?
Below are the usual payment terms offered to clients:

 Moratorium on principal
 Interest and principal monthly
 Interest monthly principal on maturity

Service & Products offered by NABARD

After independence, in order to improve rural credit, the government and Reserve Bank of India
decided to set up a committee which would take up a study of agricultural credit in India. This
committee was called All India Rural Credit Survey Committee. It was headed by Mr.Gorewalla.
The committee’s recommendations were accepted by RBI and were implemented. Accordingly,
RBI has started two major funds for providing loans to State Governments and also to cooperate
banks. The role of RBI in agricultural credit was appreciated.

National Bank for Agriculture and Rural Development (NABARD) is an apex development
financial institution in India, headquartered at Mumbai with regional offices all over India.[2] The
Bank has been entrusted with "matters concerning policy, planning and operations in the field of
credit for agriculture and other economic activities in rural areas in India". NABARD is active in
developing financial inclusion policy and is a member of the Alliance for Financial Inclusion.[3

With the increasing role of RBI, it was found too difficult to concentrate on agricultural finance.
Even the institution such as Agricultural Refinance Corporation could not provide the required
amount of refinance. A decision was taken to delink agricultural finance from RBI and to set up
a separate institution to provide agricultural finance. In 1981, a Committee to Review
Arrangement For Institutional Credit for Agriculture and Rural Development (CRAFICARD)
was set up under the chairmanship of Mr.Sivaraman. The recommendation of the CRAFICARD
committee was accepted and NABARD came into existence on July 12, 1982.
Capital source for NABARD
The existing organizations such as Agricultural Credit Department, Rural Planning Credit Cell of
RBI, and Agricultural Refinance and Development Corporation were taken over by NABARD.
The authorized capital of NABARD was Rs. 500 crores. The subscribed and paid up capital as
of March 2015 is Rs. 5000 crores out of which Central Government has contributed 4980 Crores
and RBI 20 Crores (source). In addition to this a loan of Rs. 1,200 crores was granted by RBI.
All the loans granted by RBI to various State Governments and State Cooperative banks for
agriculture were transferred to NABARD. The NABARD has been recognized as the apex
institution for agricultural finance. As the name suggests, the bank has been set up not only for
agricultural finance, but also for the development of rural areas.
Objectives of NABARD
The main objects of NABARD are as follows:

1. NABARD provides refinance assistance for agriculture, promoting rural development

activities. It also provides all necessary finance and assistance to

small scale industries.

3. NABARD in coordination with the State Governments, provides agriculture.

4. It improves small and minor irrigation by way of promoting agricultural activities.

5. It undertakes R&D in agriculture, rural industries.

6. NABARD promotes various organizations involved in agricultural production by contributing

to their capital.

Thus, the objects of NABARD can be brought under three major heads:

 Credit function.
 Development function.
 Promotional function.
Main functions of NABARD:
1. NABARD provides refinancing facilities to Commercial banks, State co-operative banks,
Central Co-operative banks, Regional rural banks and Land Development banks.
2. It provides refinancing to agriculture, small scale industries and other village and cottage
industries by lending to commercial banks.

3. It promotes rural industries, small scale and cottage industriesincluding tiny sectors by
providing loans to commercial and co-operative banks.
4. Special assistance is given by the bank for the promotion of small scale, cottage and village
industries under service area approach.

5. The bills of commercial and co-operative banks are discounted to enable them to finance for
agricultural operations.

6. The bank provides funds to State governments for undertaking developmental and
promotional activities in rural areas. In order to promote rural development and to help the
weaker sections, the bank refinances especially regional rural banks which are set up in
backward areas in most of the States.
7. Towards long-term loan, the bank is providing loans to institutionsinvolved in long-term
agricultural loan against guarantee of State government.
8. The bank is also financing research and development of agricultural and rural industries.
9. The bank implements the policy of the Central Government and the RBI with regard to
agricultural credit.
10. Provides finance for promoting non-form activities and employment in non-farm sectors
for the purpose of reducing rural unemployment.
11. It strengthens the co-operative structure in the States by providing loans to both State co-
operative banks and also to Land Development Banks.

12.It promotes minor irrigation projects by financing State Government’s sponsored irrigation
projects.

13. The bank is undertaking inspection work of Co-operative banks and Regional rural banks.
14. The bank has opened branches at all District headquarters by which it co-ordinates the
District development programmes along with the district officials.

15. The bank also helps in the annual credit plan of the commercial banks and co-ordinates the
activities of commercial and co-operative banks at the district level.

16. During natural calamities, such as droughts, crop failure and floods, the bank helps by
refinancing commercial and cooperative banks so that the farmers tide over their difficult period.

Thus, the bank is providing short-term, medium term and long-term loans for agriculture and
rural development

Ever since the setting up of NABARD, there has been a considerable increase in the distribution
of agricultural credit both by commercial and co-operative banks. NABARD has also
strengthened up the working of Regional rural banks.

Thus, we find that the role of RBI in agricultural finance has been not only taken over by
NABARD but it has been discharging it to the atmost satisfaction of all the parties concerned.

Achievements of NABARD
After the setting up of NABARD, there has been considerable increase in the rural finance
and development of small scale and cottage industries. By way of short-term credit, nearly Rs.
4,000 crores has been distributed during 90’s compared to Rs. 1,200 crores during 80’s.
By way of medium term finance, nearly Rs. 400 crores have been provided and they have been
utilized mainly by States affected by natural calamities. In long-term loan, more than Rs. 240
crores have been sanctioned for contributing to the share capital of co-operative institutions.

NABARD has also played a significant role in improving storage facilities for agricultural
commodities in the country. It has also promoted the export of agricultural commodities which
include vegetables and fruits. It has played a supplementary role in sustaining Green Revolution
in the country.
White Revolution and Blue Revolution in the form of increased milk production and fisheries
have also been contributed by the sustained efforts of NABARD. India stands the top most
country in the world in production of dairy milk.

Service & Products offered by ICICI,

History of Industrial Credit and Investment Corporation of India (ICICI)
The creation of Industrial Credit and Investment Corporation of India (ICICI) is another
milestone in the growth of the Indian Capital Market. It was incorporated in the year 1955, as a
company registered under the Companies Act. The ICICI was incorporated to finance small scale
and medium industries in the private sector.
The IFCI and SFCs confined themselves to lending activity and kept away from underwriting
and investing in business though they were authorized to subscribe for the shares and
debentures of the companies and to undertake underwriting business. Therefore, a large number
of up and coming enterprises faced continuous problems in raising funds in the capital market.
Besides, they were not in a position to secure the desired amount of loan assistance from the
financial institutions due to their thin equity base. To encourage industrial development in the
private sector, a considerable provision of underwriting facility was considered necessary to
accelerate the phase of the industrialization. To fill these gaps, the ICICI was established.

Objectives of the ICICI

The major objective of the ICICI was to meet the needs of the industry for permanent and long
term funds in the private sector. In general, the major objectives of the Corporation are:

1. To assist in creation, growth and modernization of business enterprises in the non-public

sector.

2. To encourage and promote the involvement of internal and external capital sources, in such
enterprises.

3. To motivate pvt ownership of industrial investment and to promote and assist in the expansion
of markets.

4. To provide equipment finance.

5. To provide finance for rehabilitation of industrial units.

Functions of the ICICI

In order to accomplish the above objectives, the Corporation performs the following functions:

1. Providing finance in the form of long-term or medium term loans or equity participation.

2. Sponsoring and underwriting new issues of shares and other securities,

3. Guaranteeing loans from other private investment sources.

4. Making funds available for reinvestment by revolving investment as rapidly as possible.

5. Providing project advisory services i.e. offering advice –

i. to private sector companies in the pre-investment stages on Government policies and

procedures, feasibility studies and joint venture search, and
ii. to Central and State Governments on specific policy related issues.
Types of financial assistance of the ICICI
The Corporation provides finance-in the following forms:

1. Underwriting of public issues and offer or sale of industrial securities.

2. Direct subscription to such securities.

3. Securing loans in rupees payable over periods up to 15 years.

4. Providing similar loans in foreign currencies for payment of imported capital equipment and
technical service.

5. Guaranteeing payments for credit made by others.

6. Providing credit facilities to manufacturers for promoting sale of industrial equipment on

deferred payment terms.

7. Providing financial services like leasing, installment sale and asset credit.
The ICICI sells securities from its own portfolio to the investors whenever it can get a reasonable
price for them. It does so for the dual purpose of revolving its resources for new investments and
for encouraging the investment habit in others and thereby promoting a wide spread distribution
of private industrial securities. Thus, unlike normal investors the ICICI does not retain successful
investments merely because they are profitable.

ICICI assisted manufacturing industries in all sectors, that is, the private sector, the joint sector,
the public sector and the cooperative sector but the major beneficiary was the private sector.
ICICI’s assistance comprised of foreign currency loans, rupee loans, guarantees, and subscription
of shares and debentures. The Corporation showed increasing interest in the development of new
industries in backward regions.

There was a remarkably significant increase in financial assistance by ICICI in recent years.

Role of the ICICI

The Corporation started a Merchant Banking Division in 1973 for advising its clients on a
selective basis, on raising finances in suitable forms and on restructuring of finances in the
existing companies. It also advises clients on amalgamation proposals. Assistance is provided in
preparing proposals for submission to financial institutions and banks and for negotiations with
them for loans, underwriting etc. This Division acts as Managers to the issue of capital.
Assistance is also provided for completion of formalities connected with the public issue and of
legal formalities for raising loans.

In 1982, the ICICI gave a new dimension to its merchant banking division by offering to provide
counseling for industrial investment in India to non-resident Indians and persons of Indian origin
living abroad. This is likely to prove not only the least expensive route for technological up
gradation but also a source of foreign currency funds by way of risk capital.
It has set up Venture Capital Funds for the promotion of green field companies and risk capital
investment and joined the other financial institutions in setting up SHCIL, CRISIL and OTC
Exchange of India Ltd. It has recently set up its own bank and a mutual fund like the UTI.
The Corporation’s vision has been extending far beyond its immediate function of funding
industrial projects. It has been looking at all sectors of the economy and wherever a need was
perceived, has designed either a new concept or a new instrument, or even a new institution to
cater to it. In this regard, its development activities have encompassed such diverse areas as
technology, financing, project promotion, rural development, human resources development and
publications.

It has set up ICICI Brokerage Services Limited in March 1995. It is a 100% subsidiary of I-SEC.
It commenced its securities brokerage activities in 1996. It is registered with the National Stock
Exchange of India Limited and The Mumbai Stock Exchange.

ICICI set up ICICI Credit Corporation in 1997, which later renamed as ICICI Personal Financial
Services Limited in 1999. It is offering a comprehensive range of goods and services to retail
customers.

ICICI Capital Services Ltd. was originally set up as SCICI securities Ltd. as a wholly owned
subsidiary of erstwhile SCICI Ltd. in 1994. Its object is providing stock broking services to the
institutional clients and undertaking activities such as underwriting, primary market placements
and distribution, industry and company research etc. It became a wholly owned subsidiary of
ICICI with effect from April 1, 1996.

ICICI has established ICICI bank for performing commercial banking functions in 1994. The
bank offers a wide variety of domestic and international banking services.

Mutual Funds-Meaning and benefits of mutual funds, types of mutual funds, SEBI guidelines
relating to mutual funds

2. The structure of mutual funds as per SEBI guidelines

The SEBI guidelines define the Guarantor as one who, in his capacity as an individual or in
partnership with a different entity or entities, launches a mutual fund. The role of the guarantor is
to make revenue by putting together a mutual fund and handing it to the fund manager.
A sponsor sets up the mutual funds as per the guidelines of the Indian Trust Act, 1882, for Public
Trust. They are responsible for listing with the SEBI, having provisions for resource
management and ensuring the functioning of the fund takes place as per the SEBI guidelines.
The Trustee or Trust is established through a trust deed that is implemented by the sponsors of
the funds and is accountable to all the investors of the mutual fund. The trustee company is
regulated by the Indian Companies Act 1956, while the firm and the board members are overseen
by the Indian Trust Act, 1882. The Investment management of the trust is done through an Asset
Management Company which is to be listed as per the regulations of Companies Act of 1956.

3. Role of SEBI in Mutual Fund Regulations

As far as Mutual funds are concerned, SEBI makes the policies for mutual funds and also
regulates the industry. It lays guidelines for the mutual funds to safeguard the investors’ interest.
Mutual funds are very distinct in terms of their investment strategy and asset allocation activities.
This requires bringing about uniformity in the functioning of the mutual funds that may be
similar in schemes. This will assist the investors in taking investment decisions more clearly.
To facilitate this standardization and bringing about uniformity in the similar schemes, the
mutual funds have been categorized accordingly as follows.
a. Equity Schemes
b. Debt Schemes
c. Hybrid Schemes
d. Solution Oriented Schemes
e. Other Schemes
The categorization and rationalization of mutual funds into these five broad categories ensures
that the mutual fund houses are only able to have one scheme in each sub-category, with some
exceptions. The categorization helps in simplifying the selection of funds and works in the best
interest of the investors by allowing them to evaluate their risk options prior to making informed
decisions about investing in the right scheme. Following this consolidation of schemes, the
investors can take a more informed decision without much hassle or confusion. In order to fulfill
this purpose, SEBI has come up with some guidelines to help the retail investors in their mutual
funds’ investment decisions.

4. Key Highlights of SEBI guidelines for Mutual Funds

a. Categorization of schemes into five groups – Equity, Debt, Hybrid, Solution Oriented, Others
b. To ensure uniformity, large, mid and small cap has been defined clearly
c. There is a lock-in period specified for solution-oriented schemes
d. Permission of only one scheme in each category, except for Index Funds/ Exchange Traded
Funds (ETF), Sectoral/Thematic Funds and Funds of Funds.

5. SEBI Guidelines to invest in Mutual Funds

SEBI keeps in place the regulatory framework and guidelines that govern and regulate the
financial markets in the country. The guidelines for investors are listed below.

a) Assessment your personal financial situation

Mutual funds present the most diversified form of investment options and therefore may carry a
certain amount of risk factor with it. Investors must be very clear in their assessment of their
financial position and the risk-bearing capacity in the event of poor performance of such
schemes. Investors must, therefore, consider their risk appetite in accordance with the investment
schemes.

b) Obtain researched information on the mutual funds’ investment schemes

Before venturing into mutual fund investment, it is imperative for you as an investor to obtain
detailed information about the mutual fund scheme option. Having the right information when
required to make the necessary decision is the key to making good investments. This may help in
choosing the right schemes, knowing the guidelines to follow and also be informed of the
investors’ rights.

c) Diversify your portfolios

Diversification of portfolios allows investors to spread out their investments over various
schemes thereby increasing chances of maximizing profits or mitigating risk of potentially huge
losses. Diversification is crucial to gaining long-term and sustainable financial advantage.

d) Avoid the clutter of portfolios

Choosing the right portfolio of funds requires managing and monitoring these schemes
individually with care. The investor must not clutter the portfolio and decide on the right number
of schemes to hold so as to avoid overlap and be able to manage each one of them equally well.
Not sure of the right schemes for your portfolio? ClearTax can help simplify this for you.

e) Assign a time dimension to the investment schemes

It is advisable for the investors to assign a time frame to each scheme to encourage the financial
growth of the plan. It may help in containing the volatility and fluctuations in the market if the
plans are maintained stably over a period of time.

6. How will the new categorization Impact me as an investor

This scheme is fashioned to help the investors in the following ways:
a. This may reduce the number of schemes on offer, thereby, making it comparatively easier to
choose
b. It may have some schemes get merged with the others
c. It may cause your expense ratio to fall due to the higher AUM per scheme
With the number of funds available and the changes brought about, it can get a little confusing
for a new investor to keep up. This is where ClearTax comes to your aid. Contact us for any
queries you may have regarding the SEBI guidelines for investing in mutual funds.
,